Dive Brief:

• U.S. manufacturing activity in November shrank for the eighth straight month even as a measure of new orders edged up into positive territory after seven months signaling contraction, the Institute for Supply Management said Monday.
• “Production execution eased in November, consistent with demand sluggishness and weak backlogs,” Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee, said in a statement. “Panelists again noted a continued level of uncertainty and concern about a lack of new order activity,” he said, referring to survey respondents.
• The ISM’s new orders index, while rising, has not shown steady growth since a 24-month streak of expansion that ended in May 2022, the institute said, while noting reports of growth from makers of machinery; food, beverages and tobacco; and computers and electronics.

Dive Insight:

The improvement in new orders may indicate that manufacturers could gain a tailwind from an uptick in economic growth and a decrease in borrowing costs, Oliver Allen, senior U.S. economist at Pantheon Macroeconomics, said Monday.

The signal from new orders “suggests that the drop in corporate bond yields in recent quarters and a slight improvement in external demand are starting to support U.S. manufacturers,” he said in a note to clients.

The economy this year has defied predictions of a downturn.

Gross domestic product rose at a 2.8% annual rate during the third quarter after increasing 1.4% in Q1 and 3% in Q2, according to the Bureau of Economic Analysis.

The Atlanta Fed on Monday, citing the ISM report and a measure of construction spending, upgraded its estimate for GDP growth during the current quarter to a 3.2% annual rate from 2.7% on Wednesday.

Some concerns about the direction of government policy have eased since the presidential election last month, giving CFOs and their C-suite colleagues firmer footing as they complete business strategies for 2025.

“Companies prepare plans for 2025 with the benefit of the election cycle ending,” Fiore said.

Indeed, the mood among manufacturers rose in November to the highest level in many months, S&P Global said Monday, reporting on its US Manufacturing PMI.

“Optimism about the year ahead has improved to a level not beaten in two and a half years, buoyed by the lifting of uncertainty seen in the lead up to the election, as well as the prospect of stronger economic growth and greater protectionism against foreign competition under the new Trump administration in 2025,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.

Still, the “feel-good factor has yet to feed through to higher output on the factory floor,” Williamson said, noting that production levels in November fell for the fourth straight month and at a pace unseen for nearly 18 months.

Excluding the pandemic period, the difference between current output and expected future output widened more than at any time in a decade, he said.

The gap highlights “the marked divergence between tough current conditions and the mounting expectation of better times to come,” Williamson said.